Pantry Particulars

Details emerge on retailer's Marathon co-branding deal, Fresh Initiative

Greg Lindenberg, Editor, CSP

CARY, N.C. -- President and CEO Terrance M. Marks revealed during the company's third fiscal quarter 2010 conference call new details of The Pantry Inc.'s fuel supply deal with Marathon, announced last week, and the Fresh Initiative, announced earlier this year.

Under the terms of the agreement, Marathon will supply fuel to more than 600 Pantry locations, with a joint branding relationship at approximately 285 of these sites.

(Click here for previous CSP Daily News coverage of the Marathon deal.)

"Slightly over half of these sites are currently Kangaroo branded and will remain so. The remaining 235 sites will be converted to a new joint image on the canopy and the street sign that will feature the Marathon and Kangaroo Express logos," he said. "We believe that this new co-branded approach provides us with a strong platform to accelerate development of the Kangaroo Express retail brand and capitalize on the brand strength that Marathon enjoys with fuel buyers."

Marks added, "These new co-branded locations will be replacing predominantly CITGO locations, all the North Carolina and South Carolina Texaco locations, as well as some Exxon sites."

He said that by the end of the company's fiscal year, it will have between 80 and 100 stores converted to the joint brand, the rest in early 2011. "It's a matter of pacing the actual construction work...leveraging construction resources we're not going in and touching a site twice" where possible, referring to the Marathon changes and the Fresh Initiative changes going on at the same time.

Concerning The Pantry's Fresh Initiative, Marks said, "We have completed construction in nine stores in the Raleigh-Durham [N.C.] market and are close to completing another 10. While it is still very early, the initial results from the newly renovated stores are encouraging. We have seen a measurable lift in merchandise sales in line with our expectations. We are on target to complete a total of 100 stores in North Carolina before the end of the calendar year."

(Click here for previous coverage of the Fresh Initiative.)

"It's early and it's a very small number of stores, but we're certainly pleased by the initial response that we're seeing. We're really focusing our attention on evaluating the performance of a couple key categories, such as hot dispensed beverages, which is principally coffee, packaged sandwiches, and then the overall impact on merchandise in gallons."

The program is being driven, he said, by the new Bean Street Coffee, which is alreadyahead of Fresh Initiative constructionin about 20 or 30 stores, "but we've been pleased to witness the superb performance of some related categories, packaged sandwiches being one of them."

Marks also said that the company is "encouraged" by consistently positive responses to the coffee by customers in exit interviews and anecdotally from customer comments to employees on a regular basis.

(Click here for previous coverage of Bean Street Coffee.)

Beyond sandwiches, the program offers fresh pastries, fruit cups, better-for-you snacks and salads, sales of which are all "up significantly."

He said, "We've seen very positive results across all...measurements. We've seen nothing to temper our enthusiasm."

Headquartered in Cary, N.C., The Pantry Inc. is a leading independently operated convenience store chain in the southeastern United States and one of the largest independently operated c-store chains in the country. As of Aug. 2, 2010, the company operated 1,641 stores in 11 states under select banners, including Kangaroo Express, its primary operating banner. The Pantry's stores offer a broad selection of merchandise, as well as fuel and other ancillary services.